Why Choose System Development in Vietnam? | ALLEXCEED VIETNAM

Based on the above information, we have summarized the advantages and disadvantages of offshore development in Vietnam.

According to the 2016 forecast by the Ministry of Economy, Trade and Industry, by 2030, out of a total of 850,000 Japanese engineers, there will be a shortage ranging from 410,000 to 790,000 personnel.
In the context where many companies are urgently securing human resources for digital transformation (DX) and other initiatives, it is evident that the shortage of skilled personnel will become increasingly severe in the coming years.
Our company will continue to promote offshore development in Vietnam, a highly advantageous outsourcing destination, while systematically organizing and training human resources to ensure stable service delivery to our client companies, mitigating potential future risks.

Vietnam and Japan share many similarities in terms of territory and population, which makes Japanese companies feel a strong sense of familiarity.
Please consider the data below from the perspective of selecting a location for offshore development outsourcing.

Vietnam and Japan, respectively:

Vietnam Japan

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The area and population of Vietnam are very similar to those of Japan. As of 2022, Vietnam’s population ranks among the top 15 worldwide. In terms of religion, there is little difference compared to Japan, so clients need not be overly concerned about this aspect when choosing an offshore development location.

The key points to note are the average age and economic growth rate.

In fact, at our company, the average salary for Vietnamese engineers has increased by nearly 42% over the past 10 years, and recruiting new staff has become increasingly challenging each year. Nevertheless, many of our employees have remained with us for a long time, and we continuously strive to reduce development costs by establishing efficient development processes.

We will outline the IT policies currently being implemented by the Vietnamese government, which have created the context for the increasingly vibrant offshore development outsourcing to Vietnam. Vietnam has promoted IT growth through two long-standing policies: the “IT Human Resource Development Policy” and the “Foreign Investment Attraction Policy.”

IT Human Resource Development Policy

According to the Ministry of Economy, Trade and Industry of Japan, the number of IT personnel in Japan in 2020 was approximately 920,000 and is expected to decline after peaking in 2019. In contrast, as of 2019, about 430,000 people were employed in software development companies in Vietnam, and this number is projected to increase in the near future.

*According to a 2021 publication by TopDev.

Universities in Vietnam also implement practical and specialized educational programs, ensuring that graduates possess the necessary skills to be job-ready after only a few months of post-graduate training.

The average age of employees at our company is also quite young (30 years old), with nearly half coming from leading universities such as the University of Science, Ho Chi Minh City, and Ho Chi Minh City University of Technology (equivalent to the University of Tokyo and Kyoto University in Japan). Over the past two years, we have recruited about 10 new graduates from these top universities. After joining the company and undergoing roughly two months of training, these employees are fully capable of working as offshore development team members in Vietnam. We believe we will continue to secure excellent human resources in the future.

The average age of offshore system development personnel at ALLEXCEED VIETNAM is 30 years old. Half of them are graduates from Vietnam’s top universities.

The Vietnamese character is often regarded as sharing many common traits with the Japanese. Naturally, there are individual differences, but fundamentally, Vietnamese people are considered honest, diligent, and possess a strong willingness to improve and excel in their work.

Aspiration for Growth

When asked, "Do you often code outside of working hours?" as many as 88% of programmers responded that they do so to improve their skills. This clearly shows their strong desire for self-improvement beyond regular work duties.

*Reference: TopDev report

Programmers place great importance on skill development. Therefore, if an offshore development company entrusted with a project fails to properly understand the significance of career orientation for programmers and does not provide training for long-term growth, there is a risk of a high turnover rate. To prevent this, our company is actively working to enhance the work environment and strengthen training programs.

Diligent Vietnamese people

Diligent

The second key trait we highlight is honesty combined with diligence. In a customer satisfaction survey on offshore development conducted by our company, we received feedback such as: “no arbitrary development based on personal judgment” and “any unclear points are always confirmed through Q&A.” Our company’s philosophy is to "respect the spirit of bold initiative while placing utmost importance on trustworthiness." We firmly believe that by clearly communicating our company philosophy and thoroughly training our staff, our team members will embody these qualities and diligence to sincerely meet our clients’ needs.

Employee turnover rate

The third characteristic to mention is the ease of job change. According to survey data from programmers, salary ranks as the most important factor, and regarding intentions to change jobs, 61% responded, “I’m not actively looking, but would consider changing if an opportunity arises.” In practice, it is commonly known among Japanese employees residing in Vietnam that some European and American IT companies are willing to offer double salaries to attract talent.

When selecting a company for offshore development outsourcing, although it is impossible to reduce the risk of knowledge loss due to employee turnover to zero, minimizing such risks requires careful attention to the working environment and other conditions of the offshore development companies being considered for outsourcing.

Vietnam is one of the most Japan-friendly countries in the world, which is considered one of the reasons why Vietnam has become a popular destination for offshore development outsourcing.

Japan resumed economic cooperation with Vietnam in 1992. Japan is the largest donor country to Vietnam. The first metro line in Ho Chi Minh City was also constructed using Japanese ODA funds, reflecting Japan’s significant presence in Vietnam.

Japanese culture is highly beloved, with Japanese games and TV dramas being very popular. Almost everyone knows famous anime such as Doraemon and Conan.
Although Japanese offshore development companies generally offer lower salaries compared to European and American software companies, they are still able to secure talented engineers due to a deep affection for Japan.
Japanese cuisine is also very popular; as of 2017, there were over 1,000 Japanese restaurants across Vietnam.
An important factor when choosing offshore development is the ease of acceptance in the host country.

Here is a detailed look at the main trends in offshore development in Vietnam.
First, we will explain two key development models: project-based outsourcing — the predominant form in Japan — and the lab model, which is mainly used in Vietnam.
Project-based outsourcing involves development carried out strictly according to the specifications, requirements, and detailed design provided by the client, with the final deliverable handed over upon completion.
The lab model involves setting up a dedicated team to handle the client’s requests, with a contract signed for a fixed period.
Basically, most system development in Vietnam follows the lab model, covering stages from detailed design onward.
Below is a comparison of the two models.

Project-based outsourcing is typically used when there is a shortage of personnel for a one-off task. In such cases, companies usually outsource to offshore development firms they have established relationships with.
Additionally, project-based outsourcing is sometimes employed as a trial phase before signing a contract under the lab model.
The lab model is generally used when continuous development is required to ensure a stable workforce while simultaneously improving proficiency and efficiency through ongoing development.
Basically, for continuous development needs, we recommend the lab model because it offers many advantages. However, if clients are concerned about potential idle personnel, project-based outsourcing remains an option.
Since offshore development is cost-effective, maintaining a fixed team and gradually enhancing their proficiency has become the most common approach. This can be considered an advantage that domestic development cannot easily provide.

Although the unit price tends to increase, it remains significantly lower than the unit price of Japanese system development engineers.
For your reference, we will list the benchmark prices for the Tokyo metropolitan area and nearby regions, as well as nearshore prices.

It is not sufficient to simply compare the above data, but this data serves as a very useful reference.
The reason a simple comparison is not possible is that the engineer unit price information represents the average value of all Japanese system engineers, while the offshore development company data is limited to Japanese offshore development companies in Vietnam.
The human resources in Japanese offshore development companies in Vietnam are engineers with relatively high educational qualifications and are more outstanding compared to the general level of engineers in Vietnam, making a simple comparison difficult.
Although there is a language barrier, having skilled Vietnamese engineers at this price level can be considered a significant advantage.